ITC Q3 net up 21% on improved cigarette volumes

India's biggest cigarette maker, ITC, beat estimates with a 21 percent rise in quarterly profit as cigarette volumes improved after four quarters of stagnant growth, aided by the launch of low-cost products during the quarter.

Higher taxes and tighter anti-smoking regulations in several states have impacted sales of the company, which makes four out of every five cigarettes sold in India.

Higher taxes and tighter anti-smoking regulations in several states have impacted sales of the company, which makes four out of every five cigarettes sold in India. AFP

Cheaper smokes improved volume growth by 2-3 percent after a marginal increase of 0.4 percent in the previous quarter, according to three analysts briefed by the company. ITC does not provide details of sales volumes in its earnings statements.

"The cigarette industry in India continues to be impacted by a discriminatory taxation and regulatory policy framework, the company said in a statement.

"The high incidence of tax on cigarettes has created tax arbitrage opportunities leading to the growth of illegal cigarettes in the country. Consequently, legal industry volumes have come under severe pressure," the statement said.

ITC, which is 30.8 percent owned by British American Tobacco, generates about half its revenue from cigarettes. The company also owns hotels and makes products including soap and shampoo. It said net sales from its non-cigarette consumer business grew 30 percent to Rs 1780 crore.

"The non-cigarette business has shown a good jump. This is a good sign because the company has been focusing heavily on diversification," said Naveen Trivedi, an analyst with Karvy Stock Broking Ltd. in Mumbai.

Shares in ITC, a staple for fund portfolios that consider it recession-proof, rose as much as 1.6 percent after the results, after falling more than 10 percent in the past month.